“Competitive Advantage” is so 20th Century …

We’ve heard the words “competitive advantage” so often that it is easy to forget the source and, at the time, the radical re-orientation of business thinking that emanated from them. In fact, Harvard management guru Michael Porter coined the phrase back in 1985 in his now classic book, Competitive Advantage.

In a nutshell, competitive advantages give a company an edge over its rivals and an ability to generate greater value for a firm and its shareholders. There can be many types of competitive advantages, including the firm’s cost structure, product offerings, distribution network and customer support.The more sustainable the competitive advantage, the more difficult it is for competitors to neutralize the advantage. (Investopedia.)

The concept of competitive advantage has driven management strategy and decision making for decades, but a new book is, according to the Financial Times, essentially a “battering ram” aimed straight at the door of Professor Porter’s office at Harvard.

The book, The End of Competitive Advantage, by Rita Gunther McGrath, a professor at Columbia University Business School, states that managers clinging to the competitive advantage mantra are “resisting the reality” of current corporate existence, which is defined by relentlessly fluctuating competition and competitors, fleeting opportunities and challenges.

In other words, in a global business environment characterized by constantly evolving, shifting and unpredictable influences, it is essential for companies to be in a constant state of experimentation, hypothesis and readiness to change.

Companies and managers whose “competitive advantages” are so clearly defined that they become rigid, internalized and never re-examined are in danger of atrophy brought on by their own myopia or corporate stasis, as the world of competitors, technologies, and opportunities moves on, or at the very least morphs around them.

Professor McGrath’s book may well shake the foundations of the way we think about opportunity and competition. Those active in global business know that we must all – whether sole proprietor or publicly traded company – be hyper-vigilant and nimble as we seek to position ourselves and capitalize on opportunities that may be fleeting, yet still profitable, and at the very least require us to be in a constant state of re-examination and readiness.

We can’t test every new market, or pursue every new or conceivable project, initiative or partner, but we ignore them at our peril. Our competitors are relentlessly poking and prodding at our markets, business models, ideas, and clients.

We must always be aware, informed, prepared and opportunistic, as competitive forces and circumstances rattle the foundations of much of what we have assumed about our businesses and the business environment.